TWOU calls have been all the rage lately
When we last checked in with 2U Inc (NASDAQ:TWOU), the online education specialist had its trading halted after a dismal earnings report. While TWOU has slowly picked itself up from that July 31 bottom of $11.37, it's rallying right into a trendline that could have bearish implications, if history is any guide. At last check, the security is 6.5% lower at $19.15.
More specifically, 2U stock has run head-first into its 40-day moving average, after a lengthy stretch below it, defined for this study as having traded south of the moving average 60% of the time in the past two months, and in eight of the last 10 trading days. There have been six similar encounters with this moving average in the last three years, after which the stock was lower 21 days later by 13.2%, on average, per data from Schaeffer's Senior Quantitative Analyst Rocky White, with all four of the six returns negative.
A move lower of similar magnitude would have the legion of 2U short sellers cheering. Although short interest decreased by 16.7% in the two most recent reporting periods, the 10.59 million shares sold short still accounts for 22.1% of the equity's total available float.
Meanwhile in the options pits, the focus has been almost exclusively on calls. Amid limited absolute volume, 4,345 calls have been bought in the past 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 140 puts. Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 0.27, which ranks in the bottom 2nd percentile -- underscoring a very unusual call-skew among short-term speculators.
Plus, TWOU sports a Schaeffer's Volatility Scorecard (SVS) of 89 (out of a possible 100), meaning the security had handily exceeded options traders' volatility expectations during the past year.